It seems like we were just talking about 2024 trends, and now we’re already looking ahead to 2025! The new year is just a few months away, and it’s a perfect moment to take stock of what’s working and what might change when it comes to your organization’s salary and benefit plans. From budget changes to upgraded benefits, here are four of the top trends we’re keeping a close eye on with 2025 on the horizon.
Shrinking Salary Increases
Salary budgets are top of mind for organizations as they plan for 2025. While different studies are reporting different specific numbers, the trend seems clear: salary increases are likely to be a bit smaller in 2025 than they have been recently.
Forbes reports a recent poll of over 1,800 U.S. companies by WTW that found, on average, a typical employee will likely receive a pay raise of 4.1% in 2025. This is a slight tick down from the predictions of the last couple of years, but still a healthy number well above recent eras of economic struggle. Real hourly earnings (or wage growth after inflation) remain positive, meaning employees have more buying power compared to a year ago.
In the same poll, 47% of U.S. organizations also acknowledged that they expect their salary budgets to shrink in 2025. The job market has cooled from historic highs, heading back towards a “normal” baseline pre-pandemic. With a more competitive job market, companies are pulling back on higher salaries and signing bonuses, since they’re less concerned about filling excessive job openings.
The 4.1% number isn’t identical across all research, though. Payscale found that U.S. employers are anticipating lower raises: 3.5% in 2025. In comparison, their salary budget survey found that actual (not predicted) salary increase rates in 2024 were 3.6%, down from 4% in 2023. 66% of employers also reported that salary increase budgets will likely remain at the same levels as 2024, while 19% expect increased budgets and 15% expect them to lower.
Investing in Well-Being
Outside of salary dollar amounts, 2025 is likely to be another year of increased focus on well-being benefits. As reported by SHRM, a recent McKinsey survey found that 83% of executives expect to hire more people in health and safety-related roles. Well-being remains a top priority for employers and employees alike, and benefits related to it are likely to make a strong showing in 2025.
Mercer reports that the total health benefit costs per employee are expected to rise 5.8% on average in 2025. This increase is due to a number of factors, with prescription drug spending contributing to the most. Cost-reduction measures and changes in government policy (more on that later) could help limit the increases, but expect health benefits to expand in both scope and cost in 2025.
Health-related benefits are likely to extend beyond the physical, too. The stressors of the last few years have led to increased anxiety and stress across demographics; it’s no wonder, then, that SHRM also reports 72% of companies intend to improve their mental health benefits in 2025, according to PwC. This includes expanded employee assistance programs, better access to counselors, lower copays, and even self-help tools to help employees manage their stress, focus, and spot others in distress.
Post-Election Economic Changes
It’s impossible to talk about 2025 predictions without acknowledging that, depending on the outcome of the 2024 U.S. general election, the American (and global) economic outlook could be very different. Issues like tax cuts, business tax credits, minimum wage levels, tariffs, business incentives, and more are all closely linked to election outcomes and the subsequent policy priorities of the new administration and Congress.
Additionally, benefits themselves may be part of the fallout. Topics like family leave, reproductive health care, mental health, and drug prices are all part of the political and policy conversations. The results of the election are likely to impact how those look going forward, and, in turn, how organizations’ strategies evolve to address them.
Tech, of course, is one of the most likely areas to see effects. Along with typical benefits and salary-related shifts, emerging technology is an area of concern that will almost certainly be addressed by political leaders – the question is how, not if. We can’t know which way things will go until after the election, so it’s smart to begin crafting a strategy in place either way – better prepared than caught off guard
Buzzy Bonus Benefits
Benefits themselves could see expansion in 2025, with voluntary benefits that go beyond the “traditional” items like health insurance and retirement funds. One study found that 67% of employers intend to offer more voluntary benefit choices to their employees, while 63% of employees say they would consider changing jobs for better benefits.
For instance, 68% of employers in the same survey said they’re now offering legal plans and services as part of their benefits. This includes basic assistance for common documents like wills and trusts, but they’ve also expanded with increasing needs for more complex legal assistance. With legal assistance for name changes, surrogacy and reproductive assistance, and adoption, legal benefits may expand and overlap with other evolving areas of focus. Similarly, cybersecurity protections are an area of increased interest, with employers offering services like ID theft protection, cybersecurity training, and more.
Velocity is always keeping our finger on the pulse of hiring and benefits trends in today’s fast-changing marketplace! We’re here to help your team craft the best strategy possible. Reach out anytime with questions or to learn more about how we can support your team.
By Daniel Midoneck
